FTSE 100 bosses see pay reined in

Britain's biggest companies have reined in boardroom pay and tightened
incentives in the run-up to regulatory changes that give shareholders a
binding vote on remuneration policies, an executive pay report has shown.

Private equity group Vitruvian Partners is backing the management buyout of 360Photo: Alamy

The mid-range salary increase for directors of FTSE 100 companies has marked time at 2.5pc this year but a third of bosses saw their pay frozen. Bonus payments were also lower while the proportion of companies requiring directors to hold shares with a value of more than one times salary has grown from 48pc to 62pc.

Stephen Cahill, partner in the remuneration team at Deloitte, which produced the report, said companies were listening to shareholders and making changes to ensure a better relationship with the result that there had been less friction between the two sides this year.

He added: “It is clear that companies now understand there is no rationale in normal circumstances for giving salary increases to executives that are higher than those given to other employees. It also does not mean that there should be expectations of salary increases being awarded every year.”

Companies have been re-working remuneration policies since the furore over top workers’ pay led to them being forced to give shareholders power to fix boardroom rewards. For the first time this year companies lose the right to make payments to directors unless shareholders agree.

But business advisers are concerned that the change in the balance of power could mean pay policy will become focused on legal ramifications rather than a way of communicating with shareholders and improving the business.

Mr Cahill said there would be a temptation to give lawyers responsibility for writing pay policy reports and a danger that a standard approach would be at the expense of ensuring remuneration is tailored to drive business strategy.

The report shows more companies have listened to shareholders and strengthened the link between pay and performance. Two-thirds have tied bonus rewards to the success of the business.